The financing of a departmental enterprise is provided by the State budget. It is managed in the same way as a department. Such a company is not a stand-alone entity. Examples of departmental companies are All India Radio, Doordarshan, Department of Posts, etc. Q2: What are the characteristics of departmental enterprises? The public sector has been given the responsibility of providing infrastructure to other sectors of the economy, focusing on the key and providing essential goods and services to the economy. Merits: Department societies have certain advantages, which are as follows: 3. Legal personality – These have a separate legal entity. They can sue and be prosecuted. They can buy real estate in their own name and enter into contracts with third parties, and the contracts become legally binding. 4. Protection of the public interest – They are accountable to Parliament.
This ensures that public funds are used correctly. There are three types of organizations relevant to businesses, public sector corporations and public sector enterprises – ministry government enterprises. 2. Government funding – Since the government is wholly owned by a ministry company, the government concerned is responsible for funding from the budget of the ministry concerned. Its surpluses are also part of the budget concerned. A public enterprise, a commercial organization wholly or partially owned by the State and controlled by a public authority. Some SOEs are transferred to public ownership because it is assumed, for social reasons, that the service or product should be provided by a state monopoly. Examples of this type of public enterprise are public utilities (gas, electricity, etc.), broadcasting, telecommunications and certain modes of transport. 3. Source of revenue for the state – The revenues of these companies go directly into the state treasury. Public sector organisations are formed in three different forms: SOEs are generally intended to finance themselves in the long term, but they may be subject to political constraints in their pricing policies that could run counter to this objective.
Conversely, they may receive hidden subsidies for social reasons or benefit from additional protection that is not available to competitors. These factors tend to distort the normal business operations of the company or business and often lead to disorientation of management. Partly because of these non-commercial considerations, SOEs can appear highly inefficient and put pressure on public resources in times of difficult business conditions. However, measuring the effectiveness of a state-owned enterprise is no small feat. If it produces a marketable product, such as coal or steel, that competes with other products, the normal commercial criterion of profit can be used to evaluate its performance. In the case where a utility enjoys monopoly power, economists have developed concepts such as cost-benefit analysis as a performance measurement tool. In recent years, many state-owned enterprises in developed countries have been given financial targets that take into account both social and commercial responsibilities. Although the provision of these services by SOEs is a common practice in Europe and elsewhere, private companies in the United States are generally allowed to provide such services subject to strict legal requirements. In some countries, industries such as railways, coal mining, steel, banking and insurance were nationalized for ideological reasons, while another group, such as armaments and aircraft manufacturing, was introduced into the public sector for strategic reasons. In communist countries, most forms of production, commerce and finance belong to the state; In many newly independent and less developed countries, there is a very important SOE sector. 2.
When absolute state control is required due to the strategic nature of the activities, e.g. communications, broadcasting, utilities, etc., SOEs are also often used in areas where the government wants to charge user fees but finds it politically difficult to introduce new taxes. Second, SOEs can be used to improve the efficiency of public service delivery or as a step towards (partial) privatization or hybridization. SOEs can also be a means of reducing tax burdens, as SOEs may not be included in public budgets. i. Registration – A public enterprise is incorporated under the Indian Companies Act, 1956. As with any other corporation, the management of the corporation is subject to the provisions of the Companies Act. The staff of a departmental company tends to develop a sense of responsibility for complying with rules and regulations. The needs of the people for whom the company was founded become secondary. In many cases, service companies do not achieve their objectives effectively.
The five-year plans attach great importance to the public sector in the initial phase of development. 1. Easy incorporation – The formation of a Crown corporation is much easier than a public corporation because the corporation is incorporated under the Companies Act. This process is easier. As a result of economic liberalization, the number of state-owned enterprises with public participation has increased considerably. In addition, a SOE may also be established as a joint venture in which the Government holds the majority of the shares, while the other part of the share capital is subscribed by one or more joint venture partners. A public corporation is publicly accountable because it is established with public funds. Its accounts are audited by an auditor, e.g. the Comptroller and Auditor General of India in the case of central government bodies. 1.
If the government wishes to set up a business in cooperation with a foreign or Indian private sector partner. Hindustan Machine Tools, Hindustan Steel and Hindustan Cables were tuned according to this model. A Crown corporation is incorporated and registered under the Companies Act 2013, which contains provisions on state-owned enterprises. Examples of SOEs include Indian Oil Corporation Limited, Bharat Sanchar Nigam Limited, Gas Authority of India Limited, etc. A Crown corporation can be either a corporation, in which the government can hold shares and invest publicly, or a limited liability company, in which public equity participation is not permitted.